Multilevel Marketing Companies are widespread in the community yet finding unbiased information about their operations can be difficult. With 28.58 Billion Dollars in Sales in total US Sales, this post will cover what a Multilevel Marketing Company is, how they work, whether they are legitimate companies, and where to learn more.
What is it?
The Bureau of Consumer Protection defines Multilevel Marketing as: “individuals sell[ing] products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.” (Multilevel Marketing | Bureau of Consumer Protection [Español]) . The State of Washington Department of Financial Institutions says of Multilevel Marketing: “It is very easy to become a distributor. You don’t even have to have a lot of knowledge about the product or service being sold. Most distributors hear about the product through “Opportunity Meetings”, from friends, or through “Business Opportunity Shows”. Many people initially join in order to purchase their own supply of the product at a discount.” (Washington State Department of Financial Institutions: Multi-Level Marketing Tips) The Federal Trade Commission says “Almost any product or service could be sold through multilevel marketing, including health, beauty, and fitness products that aren’t available on store shelves.” (MultiLevel Marketing | Consumer Information [Español: Planes de comercialización multiniveles).
Direct Selling 411, an informational website about Direct Selling (Multilevel Marketing) for the Direct Sellers Association, has this to say about Direct Sales: “be sure to understand the following before taking any further steps: regardless of your goals, direct selling is not “easy income,” you will not “get rich quick” and there are no silver bullets to success. Anyone who promises you any of these things is misleading you.” (For Sellers | Direct Selling 411)
Is it legitimate?
The FTC makes a distinction between legitimate and illegitimate multilevel marketing companies in this way: “If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.” (MultiLevel Marketing | Consumer Information [Español: Planes de comercialización multiniveles).
How can I determine whether a MultiLevel Marketing company is legitimate?:
The Better Business Bureau says this about joining a multilevel marketing company: “…take time to learn about the plan. What’s the company’s track record? What products does it sell? Does it sell products to the public-at-large? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the plan? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?” (FTC: The Bottom Line about Multilevel Marketing Plans)
Interested in Learning About Multilevel Marketing Companies?
The Direct Sellers Association is “the national trade association of the leading firms that manufacture and distribute goods and services sold directly to consumers. Approximately 200 companies are members of the association, including many well-known brand names.” [Direct Sellers Association] [¿Que es la Asociación de Venta Directa?]
The Direct Sellers Association has a Member Directory that abides by the Direct Sellers Association Code of Ethics. [ Código de Ética de la Asociación de Venta Directa En Español]
*The Terms Direct Selling and Multilevel Marketing are used interchangeably for the purposes of this article, but are not the same. This article by Entrepreneur magazine will shed some light on the differences between Multilevel Marketing and Direct Sales.